Which One of the Following Statements Correctly Applies to a Legally

question 7

Multiple Choice

Which one of the following statements correctly applies to a legally defined merger?

• A) The acquiring firm retains its identity and absorbs only the assets of the acquired firm.
• B) The acquired firm is completely absorbed and ceases to exist as a separate legal entity.
• C) A new firm is created that includes all the assets and liabilities of the acquiring firm plus the assets only of the acquired firm.
• D) A new firm is created from the assets and liabilities of both the acquiring and acquired firms.
• E) A merger reclassifies the acquired firm into a new entity that becomes a subsidiary of the acquiring firm.

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Definitions:

Net Income

The amount of profit left over after all expenses and taxes have been subtracted from total revenues.

Common Stockholders' Equity

The part of the equity section of a company's balance sheet that represents the ownership interest held by shareholders.

Financial Analysis

The evaluation of a company's financial statements to assess its performance and to make future financial decisions.

General-Purpose Financial Statements

Financial documents that are prepared to meet the needs of various external users who cannot demand custom reports.